Rari Capital, the DeFi protocol created by teenagers, has shipped perhaps its biggest product to date — permissionless lending pools.
The new feature allows anyone to create a lending and borrowing pool on the open interest rate protocol, meaning anyone can create a pool for any asset, thereby expanding DeFi possibilities.
Projects like NFTX, which creates liquid markets for illiquid NFTs by pooling them together and offering a token which represents a claim on one of the non-fungible assets, have already taken advantage of the new functionality on Rari. The project deployed a Fuse pool which includes PUNK; PUNK representing a CryptoPunk deposited in NFTX. This opens up the ability for users to now effectively borrow against one of the most valuable NFTs.
Not Waiting for Governance
Before the permissionless pool, Rari’s Fuse pools — which have been live since March — relied on governance decisions to add new assets or new parameteres for lending and borrowing, much like the platforms of lending giants Aave and Compound. But with permissionless pools, creation is open to anyone.
The permissionless pools are part of the project’s aim to become the Uniswap of lending, Jack Lipstone, co-founder at Rari Capital, told The Defiant. “Uniswap allows anyone to go trade whatever token is out there. Now Fuse allows you to deploy your own lending and borrowing market,” he said.
There are currently 23 unverified pools on Fuse, many of which are highly experimental. Rari provides an automated risk score for the pools and almost all of the permissionless ones are rated “UNSAFE” or “F” (with F being the lowest grade) as of Oct. 11.
But that’s not to say that the tech isn’t going to be useful. Lipstone believes people will start to understand the benefits soon.
“This is the infrastructure,” Lipstone said, explaining how these pools could be used for treasury management.
“What if a DAO wants to borrow against their treasury and pay their contributors?” Lipstone asked rhetorically. So, much like individuals taking out collateralized loans on Maker in order to maintain exposure to an asset, a project could do the same with a customized basket of tokens. For example Rari could deposit its RGT tokens into a custom pool, as Compound and Aave don’t accept RGT as collateral, and borrow against them, betting that RGT will increase in value in the meantime.
Lipstone also gave examples of a pool providing extra utility to a protocol by giving their token borrowing, lending and leverage capabilities. Using RGT again as an example, the token becomes that much more useful if a holder can earn yield on it by lending it to a Fuse pool.
Properties of Permissioned Pools
Permissionless pools also have a whitelist functionality. If a pool’s creator needs to know its counterparty, they can do so by limiting access to the pool based on wallet addresses. Identifying counterparties through KYC processes is often a regulatory requirement — Aave is also exploring whitelisting as part of its institutional offerings.
At $937M in TVL according to the project’s website, Rari is staring down the $1B milestone. At $30.89, Rari’s governance token, RGT, is up over 500% in the last 90 days. For contrast the DeFi Pulse Index (DPI), a composite of DeFi’s “blue chip” assets, is up only 15.13% in the same timeframe.
Lipstone believes it’s all just getting started, though: “There’s so much that can be done, and then built on top of Fuse. There are endless possibilities.”